Tourists will love the yen. Will Japan Love Her Back?

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Japan looks like it may finally open its borders and end its glorious isolation. The key question is: Can foreign tourists learn to love it again?

After a string of fake border openings this year that promised more than they delivered, a report Monday that Japan would lift most restrictions on tourists was the big one. If realized, the plans — which include restoring the three-shot visa waiver, removing a daily cap on arrival numbers and allowing tourists to book without a travel agent — would be more like one-way entry into Japan leave like in Japan 2019.

It’s a pragmatic, if long overdue, decision by the often cautious Prime Minister Fumio Kishida. Japan has a window that won’t come back anytime soon to normalize its border controls. The current wave of Covid cases and the nagging summer heat are both waning, paving the way for an autumn when both natural and vaccine immunity should spell respite from the disease.

More urgently, the weak yen is also a buoy as the currency is still trading near a 24-year low against the greenback. With inflation relatively low, tourists paying in dollars can expect some staggeringly cheap prices in a country where eating out was already a viable option.

After pledging in May that Kishida would gradually make entry into Japan as easy as other G-7 countries, he should be credited for a bold and potentially unpopular decision at a time when his approval ratings are plummeting. An Asahi poll on Sunday showed those who disapproved of his cabinet outweigh those who supported him, 47% to 41%.

Kishida specifically mentioned the use of the weak yen in a previous decision to relax border controls this summer. The move to restore visa waivers, which could be announced this week, could also have some impact on the currency; more yen buyers may provide support to halt its slide.

While Japan has gradually admitted more outsiders, newcomers still require visas; Embassies and consulates often do not have the staff to cope with the sudden surge in demand. Visa waiver is key and was the catalyst behind Japan’s tourism boom of the 2010s, igniting a major new engine of economic growth.

Japan’s quest for world travelers was a rare example of a highly successful government policy that turned the country into a mass tourism destination for the first time. An original goal of 20 million visitors in 2020 was surpassed with five years to go and instead doubled. Hotel and theme park construction boomed; Politicians spoke of becoming a world leader like France, which welcomes 90 million visitors a year.

Covid put those plans on hold. But it has given Japan an opportunity to use the pandemic-era reset and the weak yen to switch to a smarter strategy.

Visitors will love the weak yen, but Japan might not like it. Even before Covid, traffic jams and rubbish on Kyoto’s old streets had become a symbol of the downside of overtourism. With its dense concentration of cultural artifacts and sights, Kyoto suffers from the same overcrowding problem as cities like Barcelona or Venice try to solve the problem with a tourist tax. A proud local population had begun to resent the hordes of visitors before the pandemic struck.

The airline’s capacity is likely to exceed the number of initially returning tourists; In any case, Chinese residents, who accounted for more than a third of visitors before the pandemic, are still unlikely to return due to their own home quarantine requirements. So, as Japan opens up to the world, it can begin to change expectations.

Instead of focusing on the sheer number of annual visitors, it should put more effort into extracting the value of those making the trip. Average spending per person in 2019 was just 159,000 yen ($1,113). In the coming years, the guidelines should redouble paths to encourage more high-net-worth individuals who can afford longer (and expensive) stays.

Local buy-in is crucial to avoid another Kyoto situation. Tourists should be encouraged to visit other regions, not just Kyoto, Osaka and Tokyo, and Japan should make getting there as easy as possible. Policymakers should also think about what types of destinations and experiences foreigners want, rather than just offering those preferred by domestic travelers, who are often older and prefer shorter trips. Japan still lacks the world’s top luxury resorts, while Shinzo Abe-era plans to build casinos have stalled for years.

Road bumps lie ahead of us. Although there are no laws in Japan requiring masks, there are still strong societal expectations, and mask-free foreign tourists are sure to become a topic of conversation. Expect objections from the medical community, especially with the next wave of cases arriving when the weather turns cold. And the very likely emergence of another new variant this winter could throw things back to square one. But for now, potential visitors may be able to recapture a pre-pandemic normal: Forget how to process visa paperwork and instead focus on when is the best time to exchange into yen.

More from the Bloomberg Opinion:

• Japan’s Covid Isolation Lasted Too Long: Gearoid Reidy

• Mask off, Singapore smiles again at high earners: Daniel Moss

• Relax, this is not the future of Japanese tourism: Gearoid Reidy

This column does not necessarily represent the opinion of the editors or of Bloomberg LP and its owners.

Gearoid Reidy is a Bloomberg Opinion columnist covering Japan and Korea. Previously, he led the breaking news team in North Asia and was deputy bureau chief in Tokyo.

More stories like this are available on bloomberg.com/opinion

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